Are you interested in purchasing an existing janitorial business but need financing to make it happen? If so, you might want to consider an SBA7a loan. This type of loan can help you buy a business with a proven track record, such as a janitorial business, and provide the working capital you need to succeed. In this blog post, we'll discuss how to use an SBA7a loan to purchase a janitorial business.
Due Diligence
The first step in purchasing a janitorial business is to perform due diligence. This means gathering information about the business, its financials, and its operations. In the case of purchasing an existing janitorial business, you will want to ask the seller for their past three years of tax returns and an interim year-to-date statement. This information will help you understand the business's net income, which is essential when applying for an SBA7a loan.
Analyzing the Financials
Once you have obtained the financial information, you will need to analyze it to determine if the business has enough net income to cover the SBA loan payments. For example, let's say you are looking to get a loan for $300,000. You will want to ensure that the business has enough net income to cover the debt payments and still have a reasonable profit margin.
When analyzing the financials, you will also want to look for any add-backs or personal expenses that the seller may have included in the tax returns. Add-backs are expenses that are not directly related to the business's operations, such as personal travel or meals. By adding back these expenses, you can get a better understanding of the business's true net income.
Working with a Banker
Once you have analyzed the financials and determined that the business has enough net income to cover the SBA7a loan payments, you will need to find a banker who can underwrite the loan. This is where working with a lending expert like Beau Eckstein can be beneficial. Beau can help you find the right banker and ensure that your loan application is structured correctly to increase your chances of approval.
Conclusion
Purchasing an existing janitorial business can be a great investment opportunity. By using an SBA7a loan, you can secure financing for the purchase and working capital needed to succeed. However, it is essential to perform due diligence, analyze the financials, and work with a banker to ensure a successful transaction. If you're interested in learning more about how to finance your real estate investments, consider booking a free strategy call with Beau Eckstein, the host of the Investor Financing Podcast.